Recent changes to Illinois law have toughened the criminal and civil penalties relating to Medicaid fraud, which combine with already significant state and federal criminal penalties, civil penalties and potential exclusion from government-funded healthcare programs.

On August 16, Illinois Governor Pat Quinn signed legislation that increases the penalty for making false statements relating to a federal or state healthcare program from a misdemeanor to a felony. Under the new law, violations are class 4 felonies that can be punished by one to three years in prison and fines of up to $25,000 for individuals and $50,000 for corporations. The same law also added definitions of Medicaid fraud to those that already existed. Medicaid fraud is punishable as a felony under state law as well, if the conduct causes sufficient damage to the state. State Senator John G. Mulroe, a sponsor of the bill, stated that he hopes the increased penalties would serve to discourage Medicaid fraud by providers. The Illinois Department of Healthcare and Family Services referred 38 cases of fraud to prosecutors and terminated 144 providers in 2012.

In addition to these enhanced criminal penalties, on August 27 Governor Quinn signed legislation authorizing the imposition of civil money penalties on anyone who knowingly submits a fraudulent claim to the Illinois Medicaid program, in amounts that can range from $10,000 to $50,000. The penalties may be imposed on providers in a number of circumstances, including the presentation of a claim for a service the provider knows was not performed, the presentation of a claim for a service that was not medically necessary or contracting with an entity or person excluded from a federal or state healthcare program. The new law also allows the state to exclude the provider in the same proceeding that assessed the civil money penalty. These potential administrative remedies supplement the provisions of the Illinois False Claims Act, which provide for treble damages and penalties of $5,500 to $11,000 for each false claim.

In addition to the increased state penalties, there are a number of existing criminal statutes available to federal prosecutors for the pursuit of healthcare fraud, including the healthcare fraud, mail fraud, wire fraud and anti-kickback statutes. Individuals who are convicted under these statutes face potentially lengthy prison terms; the maximum potential penalty under the fraud statutes is 20 years of imprisonment with the potential of life imprisonment under the healthcare fraud statute if death results from the violation. The federal government also has the ability to seek civil remedies, including civil money penalties, as well as damages under the False Claims Act, which like the Illinois False Claims Act provides for treble damages and penalties between $5,500 and $11,000 for each false claim. The federal government can also exclude providers from federal healthcare programs. Lawsuits under the Illinois and federal False Claims Acts may be brought by both the respective governments and private litigants who are known as qui tam relators. Similar to the Illinois activity discussed above, the federal agency that handles exclusions has recently confirmed the broad reach of its authority and a bill has been introduced in Congress to increase federal exclusion authority further.